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Wii, DS Drive Record GameStop First Quarter

Wii, DS Drive Record GameStop First Quarter

May 23, 2007 | By Brandon Boyer

Retailer GameStop has released record Q1 results showing profits up 111 percent to $24.7 million and sales up 23 percent to $1.28 billion, thanks to "overwhelming demand for Nintendo's Wii and DS Lite systems," as well as other strong next-gen hardware sales.

GameStop reported that hardware sales were up 75.1 percent for the quarter, driven largely by the Wii and DS, despite their supply constraints, as well as "strong sales" of Microsoft's Xbox 360 and Sony's PS3.

On the software side, GameStop said its top selling games were Nintendo's Pokemon Diamond and Pearl, Sony's God of War II, Activision's Guitar Hero II, Microsoft and Real Time Worlds' Crackdown, and Ubisoft's Ghost Recon: Advanced Warfighter 2.

GameStop also reported that its comparable store sales increased 15.3 percent during the first quarter, better than previously released guidance of 12 percent to 14 percent, and said it was expecting comparable sales to range from 16 percent to 18 percent for its second quarter.

For its full 2007 year, GameStop said it expects sales to grow between 19 percent and 21 percent, and comparable store sales of 14 percent to 16 percent.

Said GameStop CEO R. Richard Fontaine, "Our first quarter results were driven by the strong growth of next generation hardware despite both Nintendo products, the Wii and DS Lite, being in short supply throughout the quarter."

"Our business is benefiting from unmatched platform expansion," he added. "For much of the quarter, seven different platforms were represented among our top 25 best sellers. Not only was this unprecedented, but there is every indication that the Wii and DS Lite titles are attracting a new audience of gamers, while the allure of genre breakthrough titles like Guitar Hero II are expanding the audience for video game product."

[UPDATE: Speaking in its call to investors, GameStop executives commented on the coming year being the most "platform diverse year ever," and added that there were "many more price breaks to come over this cycle, all of which increase will increase install base," though they stopped short of giving any more specifics.

Speaking to that point, executives noted that the recent PSP price reduction more than doubled sales of the handheld, as Sony kicks off its campaign to target the platform for younger audiences.

Asked whether Sony's PlayStation 3 will continue to sustain sales at this price point, GameStop said it was watching the coming months to measure the impact of new exclusive titles such as Lair and Ninja Gaiden Sigma.

Fontaine added that the general consensus was that the PS3 launch was "good, but not great," and that the price point impact was much greater in its European stores with the added VAT expenses. The launch was "by no means a disaster," he said, but the price point post-Christmas was certainly "being felt."

With the Wii, executives said that they didn't feel the "pent up demand" for the system had come close to subsiding, but added that supplies from Nintendo to its U.S. stores had clearly improved, and expected that trend to continue through June.

While the company couldn't provide firm demographic numbers, anecdotally, it said, it did feel that while the first wave of sales following launch were the domain of hardcore gamers, "at this point, more of these things are going to non-traditional gamers."

Said Fontaine on the Wii, "We're backing up our strong feeling that this is a major change in the business."]

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